FHA vs Conventional Loans in Washington: Credit Tiers, MIP and Early PMI Removal
Updated October 2026
A Tacoma buyer with limited savings may receive a lower initial payment from FHA, while a Spokane buyer with stronger credit may prefer conventional financing with cancellable private mortgage insurance. The better choice depends on credit, down payment, insurance costs, and how long the mortgage will remain outstanding.
Compare the complete payment at your credit tier
The 2026 FHA floor is $541,287 for a one-unit home. Higher county limits can apply, so check HUD FHA Mortgage Limits before treating the floor as a statewide ceiling. The baseline conventional conforming limit is $832,750, with higher limits in designated counties.
FHA generally allows 3.5% down with a qualifying credit score of at least 580 under program rules; lenders may require more. Scores from 500 through 579 generally require at least 10% down, and lender availability is narrower. Conventional eligibility depends on the program and underwriting findings, while pricing and PMI can change materially with credit.
| Cost component | FHA | Conventional |
|---|---|---|
| Initial mortgage insurance | Usually 1.75% upfront MIP | Depends on selected PMI structure |
| Ongoing insurance | Annual MIP collected monthly | PMI based on borrower and loan factors |
| Equity-based cancellation | Not available on the same terms as PMI | Available when applicable conditions are met |
Financing upfront MIP increases the starting balance. Compare identical purchase prices and available cash rather than simply matching interest rates.
Understand how mortgage insurance ends
For most new FHA loans, annual MIP lasts 11 years with an original down payment of at least 10%; with less down, it generally lasts for the mortgage term. Appreciation alone does not remove it.
For many conventional principal-residence loans, borrowers can request PMI cancellation at 80% of original value when required conditions are met. Automatic termination generally occurs at the scheduled 78% point if payments are current. These percentages describe loan-to-value, not the percentage of principal repaid.
Current-value cancellation based on appreciation follows separate investor rules, including seasoning, payment history, and valuation requirements. The Consumer Financial Protection Bureau explains the distinction. Track scheduled balance reduction with the amortization schedule.
Add assistance without overlooking the second mortgage
The Washington State Housing Finance Commission (WSHFC) offers Home Advantage and associated DPA options that may provide a second mortgage equal to 4% or 5% of the first loan amount, depending on current program terms. Opportunity DPA and the Covenant Homeownership Program have separate eligibility rules.
Assistance is not automatically a grant. Compare repayment terms and first-mortgage pricing, then use the monthly payment calculator to evaluate the full obligation.
Editorial Methodology & Primary Sources
Verification date: Not recorded; check the primary source and lender timestamp before relying on an estimate.
Rate comparisons use participating lender feeds, not a whole-market survey or guaranteed offers. Freddie Mac PMMS is a market benchmark, not a personalized quote. Calculator models rely on published regulatory formulas and disclosed assumptions rather than fabricated first-person loan testing.
Monthly principal and interest use the amortization formula P × r / (1 − (1 + r)−n), where r is the monthly note rate and n is the number of payments; at zero interest use P / n. PITI adds monthly property taxes and homeowners insurance; PMI is separate. APR includes applicable finance charges under Regulation Z and is not the note rate used for payments. Compare lender Loan Estimates for actual APR and fees.
- Consumer Financial Protection Bureau (CFPB) — Loan Estimates, APR and borrower disclosures; Regulation Z.
- U.S. Department of Housing and Urban Development (HUD / FHA) — FHA program guidance.
- U.S. Department of Veterans Affairs (VA) — VA loan eligibility and benefits.
- Freddie Mac Primary Mortgage Market Survey (PMMS) — published rate benchmarks.
- U.S. Census state tax collections — state property tax benchmarks; confirm parcel-specific assessments and exemptions with the state revenue department and local assessor.
The payment snapshot uses illustrative annual taxes of 1% of home price, $1,200 insurance and 0.5% PMI below 20% down, not verified local quotes. Other calculators disclose their inputs and assumptions. Published guidance and lender feeds may change independently; confirm current program rules, taxes and offers before a decision.